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Eurobond and CDS analysis: US bond yields are cold, Eurobonds and CDS gain value

Our foreign currency securities are gaining value, but the market is in bad shape

March 12, 2021


On Friday morning, the yield on the 10-year US government debt in Asia rose again to 1,548%. In addition to the reduction of the first jobless claims in the US, Yellen’s constant mention of additional financial incentives brings sales in 10 and 30 years. However, the 10-year and 30-year Treasury auctions were successful. So there is no oversupply. The ECB’s decision to accelerate its bond buying program could also ease tension in the US bond market by suppressing government bond yields in Europe.

On the other hand, the United States CPI (core 1.3%), which rose to 1.7% in February, is expected to exceed 2% in the March-June period due to the base effect. ING predicted in the report it wrote yesterday that the yield on the 10-year bond will rise above 2% during this period and close the year at 2%.

With risk appetite partially recovering in Asia, the dollar index lost momentum and fell to a one-week low. News of public support for the Chinese stock markets entering the bear market also supported the recovery of risk appetite in Asia. At 07:00, at USD / TL 7.50, awaits the economic reform package that President Erdogan will announce today.

However, while the price of our Eurobonds, which are sensitive to more dollars and the appetite for global risk, increased, the premium on CDS decreased, but remained above 300 basis points.

İş Yatrım explained the prices on the market as of Thursday evening as follows:

New spikes in US Treasury yields and increased volatility have recently created sales by negatively impacting emerging market indices and stocks, while US inflation data released this week did not. point to an unexpected increase and the levels of demand and issuance of US Treasuries at reasonable levels, the appetite for risk increased again.

Following strong sales of Turkish Treasury Eurobonds that began in late February, rising yields and the recovery of the Turkish lira strengthened external demand and yields declined again. The five-year country risk premium also fell to 315 basis points after approaching 350 basis points.

Turkish Treasury Eurobonds started the week with a very weak performance after selling in TL at the beginning of the week. While US Treasury yields stopped rising and strong demand for TL resulted in the recovery, strong demand came to the fore for developing country equities following economic data from USA

Treasuries have gained stronger momentum today, while the yield curve has contracted by more than thirty basis points in two days. The five and ten year values ​​were down to 4.65% and 5.85%, while the long side of more than 7% traded in the region of 6.60%.

While the company’s values ​​lagged behind strong performance compared to treasury assets, liquidity weakened significantly in many assets, and demand to buy was several times greater than demand to sell. Long-term subordinated securities are in strong demand both domestically and abroad, while it has become more difficult to find value in the 2027-2031 region. Seniors due 2025-26 traded in two directions through the middle of the week, while buyers were more active on this side today and yields contracted in the 30-35 basis point range.

Treasury issues, in which the market focuses on US inflation data, were better than the seven-year bond issue at the end of February, which had one of the lowest demands in history. While demand remained below average, it was not weak, causing the market to move negatively and impairing the market to trade in a better tone ahead of today’s thirty-year issue.

At the European Central Bank meeting, the announcement that bond purchases will proceed faster this quarter caused a five basis point contraction in German Treasury yields, but the effect was short-lived and values ​​returned to the level -0.33%.

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